Money mistakes can topple your financial plans for the future. By familiarizing yourself with some of the most common financial missteps, you can avoid the money woes that often accompany these errors.
These are some of the most common pitfalls to be aware of:
Everyday demands on your budget can make it difficult to find even a few dollars to set aside for a rainy day. With no savings, emergencies like car and home repairs can force you to take on debt you can’t afford. With less cash available for things like debt reduction or saving, you can quickly lose control of your finances.
A savings account provides you with cash for unexpected expenses and allows you to stop living paycheck to paycheck. You can avoid the no-savings pitfall by making a growing savings account your first priority. Try auditing your budget to find ways to re-route funds to a savings account. That re-routing may feel like a real sacrifice, but as your savings grows, so does your control over your financial situation. That control can be more satisfying than a new car or expensive vacation.
It’s easy to find yourself trapped by overwhelming debt. Credit card offers arrive in the mail almost daily, and stores you shop at regularly invite you to save by applying for and using their store’s credit card. Add home and automobile loans and it’s simple to see how you can quickly be swamped by overwhelming debt--the too-much-debt pitfall.
Additionally, if you apply for a credit card online without taking the time to shop for the best available card, you may be adding high interest charges and excessive fees to your already burdensome debt load.
You can avoid this pitfall by saying “no” to new debt and formulating a plan to pay off old debt. The easiest way to eliminate more than one or two debts is to use the snowball method. Determine how soon you want to eliminate your first debt and figure out what your monthly payment needs to be. Budget this amount in addition to your other debt payments, and you are on your way to eliminating your debt.
Late payments wreak havoc on your credit rating, making it difficult to qualify for the low interest rates that make debt more affordable. Automobile loans, mortgages, and credit cards all require a high credit score to qualify for the best rates. Credit cards by credit score not only charge a higher rate for a low score, but they can also tack on fees and charges that make using a card even more expensive.
Don’t allow this common pitfall to derail your plans for the future. If you are struggling to make timely payments, talk to your creditor. Many lenders are willing to reorganize your debt, making it possible for you to get your payments back on track. Seek the advice of a trusted financial advisor if you can’t solve your money problems on our own.
Financial pitfalls can be avoided by planning for the future and living within a realistic budget.